Éamon Ó Cuív (Galway West, Fianna Fail)

Go raibh míle maith agat. Tá áthas orm go bhfuil deis agam cúpla focal eile a rá ar an ábhar seo - bhí deis agam aréir ach tá go leor rudaí eile a d'fhéadfainn a rá.

One matter disappoints me slightly. In politics I have always taken the view that if I agree with something, no matter who says or does it, I will admit it. I have also taken the view that if I am proved wrong in something I should be big enough to accept I am wrong. Therefore, I am somewhat disappointed that it seems to be politics as normal with regard to the Government. However, it would not be right for us to play this game back no matter how tempting it is. It would be very easy for us to stand here and say we told you so, there were not the handy easy answers we were told about before the election. I reiterate what I stated last night, if the Government does the right thing now that it has the full facts I will support it in so doing. I hope some day the Government will admit that when it got into the hot seat and was faced with the complexity of the problems it actually found out then that what the previous Administration had been doing was the only real choice.

It was interesting to hear about the stress tests last week. One would think they had suddenly come out of the air in the past three weeks because of the new Government. We set them in train some time ago, having done previous stress tests. To a certain extent, a stress test is somewhat like digging a bog. One will only know when one gets to the solid ground when one hits the rock. We are not quite sure whether we are at solid ground yet but one thing is certain - until one reaches the solid area one cannot build the house. We cannot re-grow the banks until we find out where the bottom line is.

However, unlike the bog where one knows when one hits the solid ground, the problem with stress tests is that in themselves they create stress. They can affect the price of property on the market. This can in turn affect the performance of the economy, which in turn can affect the outcome of the stress test, or rather, whether the stress test proves in time to be the ultimate stress test, by giving the most conservative view. In that regard reality will be a little better than the test.

There was much talk about burning the bondholders. My colleague spoke of something I have been saying for a very long time. He quoted the letter from the credit unions and pointed to an issue I have mentioned repeatedly, namely, there is a great amount of ordinary people's money in bonds and financial instruments and one cannot separate it from the rich people's money. There is a large amount in pension funds, insurance and credit funds. If anybody can tell me there is a handy way to segregate all of that, separating out who to hit, I would love to hear how to do it. Nobody has yet told me how one can ensure, when hitting financial instruments, one hits only those belonging to rich people, not those belonging to the ordinary punters.

There is another way of approaching the problem. We had started to go down that road before Christmas, namely, to look at the source of funding and see whether Irish money could replace the borrowed money. However, to get that funding one must assure people, in this case Irish people, that sovereign bonds will not be reneged upon. I refer to the legislation I introduced to the House before Christmas in which we sought to encourage pension funds to invest in Irish sovereign bonds that would give a very good yield to those funds, far superior to that available in German bonds, and would also give money from Ireland to the Exchequer on very long-term loans of up to 35 years. No pension fund in Ireland will invest in a bond it does not think will be secure into the future. We looked and found that of €20 billion in Irish pension funds, 95% of the bonds in which they had invested were German, with practically no money in Irish bonds. That is an export of €20 billion from this country. There is another €40 billion in equities. It is not attractive for pension funds at the moment to invest in the German bonds because the rate is too low and if a person wants a good return on the pension, the tradition has been to put it into equities and then into bonds. The Irish sovereign bonds, as long as there is an absolute guarantee the bonds will not be reneged upon, give a much better return, in excess of 6%. The advantage of that was that it was attractive for some of the money now in equities to transfer into bonds. There was an ability through this to attract up to €7 billion of pension funds over time that is currently outside the county into Irish Exchequer funds issued by the NTMA. That would replace that amount of foreign borrowing. It is a simple formula. The beauty is that if there is a high rate of interest, it is being paid by the investor to himself, because the taxpayer is paying it to the taxpayer when it is being paid into Irish private pension funds.

It also deals with another problem facing society, that has not been debated here very often, but which is affected by everything that has happened in the banks and the markets: the difficulty faced by pension funds, both defined and non-defined, in resolving the huge issues they face since the collapse of the market. That is often ignored by those who are absolutely cavalier about people's money and bonds. They forget it is not that simple and that it will have an effect on people's lives in all sorts of ways.

Is the Minister continuing to pursue the policy we were pursuing on these sovereign bonds? I understood these bonds were to be publicly issued by the NTMA in the early part of this year and it is a no-brainer that we could all agree upon.

I believe in patriotism. Perhaps I am naive and old fashioned in that but we must be honest; the other problem that drove the IMF in here was the fact that Irish people, corporate and private, were taking money out of banks in this country and putting it into the sterling area. There has been a huge withdrawal of money from our banks. We were and are totally dependent on the ECB putting money into our banks to fill the black hole that has arisen as a result. We would not have been as dependent, and the IMF issue would not have arisen, if there had not been a flight of capital. It is hard to control the large corporate bodies but we could decide as a people, and it is incumbent on everyone in this House, to create a confidence in our future so that money flows back into the economy. Flight of capital used to be a preoccupation of the left, which was always on about nationalising banks in the 1970s and 1980s. They used to say Allied Irish Banks would invest money in Ireland and Bank of Ireland would invest it abroad and they were always calling for the circle to be closed and the money to be kept in the country.

No matter how painful it might be for this side of the House, we must support the Government in view of the way we were treated. I do not think we were treated fairly because for many of the decisions there were no viable alternatives. No matter how tempting it is, however, I do not think it is in the national interest to play that game back and I do not intend to do so. It is much more important to look at the interests of the Irish people, which are to encourage people by creating certainty and confidence in the banks and to bring that money back.

The management of the banks is another issue. There are many things where I still see no alternative if I had to do them again. We were probably too careful, because we always hear the argument about market confidence and corporate knowledge. We were too slow and careful to move against senior management and directors in the banks. We paid too much heed to the market, even when the market had no confidence in them because of what they had done. Looking back, there is a lot of hurt felt by Irish people that a group of people could bring us to this ruination and seem to be able to walk away or retain their jobs and large amounts of money.

It has become a habit for broad swathes of the population to disclaim any responsibility for what happened. There were many bank managers who, for the sake of commission, when a young person applied for a loan for a house, would tell him that he had not asked for enough money and to take a car as part of the 30 year loan. The young person was not warned, as any proper business should do, that he should never take a car on a 30 year loan because no car will ever last 30 years. Those bank managers are as guilty as anyone else for tempting young people with money for the sake of commission.

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